The market has three risky assets. The variance-covariance matrix of the risky assets are as follows. ri 12 13 r1 12 0.25 0 0 4 -0.2 0.1 Assume the market portfolio is M E(rm) = 0.08. = 13 -0.2 0.1 1 0.2 0 r +0.50 r + 0.3 0 r3. Further assume (a) What is the variance of M? (b) What is the covariance of r2 and M? (c) What is B? (d) If the rate of return of the risk-free asset is 0.02. Then what is the fair expected rate of return of security 2? (e) An investor wants to invest in a portfolio P = 0.40r+0.60r3. What is its "fair" expected rate of return?